Second Mortgage

When you already have mortgage secured by a home and you want to obtain additional money using the house as collateral, you might consider applying for a second mortgage.

The Second Mortgage Process

You do not have to use the same lender you have your mortgage with to obtain your second mortgage.  Regardless of whom your lender is, the factors used to obtain your second mortgage will be:

• The outstanding amount of the first mortgage  (mortgage records)
• The market value of the property  (appraisal)
• Your credit worthiness (credit report)

Once the lender obtains all of these factors, they will let you know how much, if anything, you may borrow. For example, if you owe $100,000 on a house that’s worth $200,000, the lender may let you take back as a second mortgage 80% of the home’s value. In this case, that would be $160,000. Because you still owe $100,000. You would be able to get a second mortgage for $60,000.

You’d repay interest and principal just like your first mortgage. However, the interest rate is higher than your first mortgage.

Second Mortgage Reasons

Second Mortgages are used for the following reasons:

• Pay for college education expenses
• Consolidate and pay off other loans
• Home improvements
• Vacations

Remember that second mortgages are expected to be repaid in a shorter period of time than your first mortgage.

Steve Wyrostek -HomeLoans.org Expert A 20 year plus veteran of the insurance industry, Steve managed departments in the personal and commercial lines areas of major insurers. He’s familiar with how insurance—ranging from boat to workers compensation—works.